Rising Ventures Investor Profile: Pramod Shedde

This Investor Feature is based on a recent interview with Pramod Shedde, a pioneer of India’s venture capital sector. Pramod discusses problems and prospects for sustainable SME investment in India and explains why many of the country’s green funds are getting it wrong.

To say that Pramod Shedde is one of the pioneers of venture capital in India is no overstatement. Mr. Shedde has over 30 years of experience in the financial sector, a career studded with impressive titles including a term as President of the Indian Venture Capital Association and a recent stint as a Managing Partner of BTS Investment Advisors, Pvt. Ltd. In 1988, he helped co-found ICICI Venture, an ambitious endeavor, Shedde notes, as there was ?very little in the way of venture capital in India at the time.?

But in our interview, Shedde makes clear that he is much less interested in VC’s past as where the sector is going and the trends that are shaping its growth. During our discussion, this veteran of the Indian financial community explains why he thinks triple-bottom-line investing is becoming an increasingly attractive proposition for investors in India.

Shedde sees significant investment in India beginning to move toward sustainable sectors, a shift he describes as being largely driven by environmental and social ills, such as the challenge of rampant power shortages that especially afflict rural areas, or unwieldy amounts of urban waste generation. The demand this generates intersects with India’s comparative advantages such as a large endowment of locations suitable for wind power production or low production costs that ease scalability in the organic agriculture sector.

Yet even with the gradual mainstreaming of sustainable technologies, the current dearth of triple-bottom-line funds, and the obstinate barriers to growth facing many of the country’s green and BoP focused startups warrants some further exploration. Shedde points to a number of potential factors, including the need for a better policy environment to nurture these companies, but he emphasizes that there is still mainly a lack of adequate deal flow of smaller enterprises. Many SMEs have the potential to be solid investments but suffer from poor management–Shedde points to the oft cited situation of a single promoter who does not have the team needed to help manage the marketing, financial and other aspects of the enterprise that will help it to grow.

Here Shedde places much of the burden of adaptation on investors, arguing that if they expect to unlock the growth potential of a small sustainable enterprise, they have to be willing to tailor their funds specifically to these companies. A successful green fund in India, Shedde explains, must have a long investment cycle, a specific sector focus and a lead investor who believes in that sector and has a great deal of experience in it. He laments that unfortunately, most green funds in India today are getting it wrong.

So will Shedde himself be one of the investors to popularize this new investment framework? He indicates that he has indeed explored the idea of creating a new fund for sustainable startups. He has noted the lack of VC funds in this area and just as he helped to usher in a new era of venture capital in India, he sees sustainability as being a new shift on the horizon. Shedde makes clear that he believes the low levels of sustainable SME investment are not out of any absence of interest from entrepreneurs, a fact he noticed through his participation in the 2006 New Ventures India Investor Forum, when a deluge of 150 business plans from eager entrepreneurs flooded the NVI offices. In all, Shedde argues that there is no real shortage of potential deals, only of willing investors. Whether Shedde becomes one of those investors remains to be seen, but if he does, it would not be surprising if many others in the VC community followed.

The Rising Ventures Series features articles, announcements and profiles of investors and entrepreneurs related to the theme of innovative small and medium businesses (SMEs) in emerging markets that deliver social and/or environmental benefits. These business models have been identified through the New Ventures (www.new-ventures.org) and Development through Enterprise (www.nextbillion.net) projects. To view other Features in the Series, visit http://www.new-ventures.org/risingventures